INVESCO
BOND INCOME PLUS LIMITED
HALF-YEARLY
FINANCIAL REPORT FOR THE
SIX
MONTHS ENDED 30 JUNE
2023
Unless
otherwise stated, all page numbers below refer to the Half-Yearly
Financial Report on the Company's website.
Investment
Objective
The
Company's investment objective is to seek to obtain capital growth
and high income from investment, predominantly in high-yielding
fixed-interest securities.
Investment
Policy
The Company
seeks to provide a high level of dividend income relative to
prevailing interest rates mainly through investment in bonds and
other fixed-interest securities. The Company also invests in
equities and other equity-like instruments consistent with the
overall objective.
Financial
Information and Performance Statistics
Total
Return Statistics(1)(2)
with
dividends reinvested
|
For
Six
|
For
Year
|
|
Months
to
|
Ended
|
|
30
June
|
31
December
|
|
2023
|
2022
|
|
|
|
Net
asset value - total return with dividends
reinvested
|
+2.1
|
-10.8
|
Share
price - total return with dividends reinvested
|
+1.0
|
-5.2
|
Capital
Statistics
|
At
|
At
|
|
30
June
|
31
December
|
|
2023
|
2022
|
Net
assets (£'000)
|
284,145
|
281,089
|
Net
asset value per ordinary share(2)
|
159.90p
|
162.20p
|
Share
price(1)
|
162.00p
|
166.00p
|
Premium(2)
|
1.3%
|
2.3%
|
Gearing(2)
|
|
|
Gross
gearing
|
20.5%
|
19.1%
|
Net
gearing
|
16.9%
|
15.7%
|
|
|
|
Performance
Statistics
|
|
|
|
For
Six
|
For
Six
|
|
Months
to
|
Months
to
|
|
30
June
|
30
June
|
|
2023
|
2022
|
Revenue
return per share
|
6.16p
|
5.97p
|
Capital
return per share
|
(2.77)p
|
(28.62)p
|
|
|
|
Total
return per ordinary share
|
3.39p
|
(22.65)p
|
Dividend
for the period
|
5.75p
|
5.50p
|
(1) Source:
Refinitiv.
(2) Alternative
Performance Measures (APM). See pages 15 and 16 for the explanation
and calculation of APMs. Further details are provided in the
Glossary of Terms and Alternative Performance Measures in the
Company's 2022 annual financial report.
Chairman's
Statement
Highlights
· Positive
Net Asset Value total return of 2.1% in a challenging market
environment.
· Dividend
increased to 5.75p.
· Share
issuances continued in the period.
2023 began
where 2022 left off with the outlook for inflation and hence
interest rates dominating the financial landscape. Those looking
for signs that an end to the aggressive tightening in monetary
policy was close at hand found little grounds for optimism as
inflation showed worrying signs of being `sticky' and markets
priced in the prospect of interest rates remaining `higher for
longer.'
Economic
growth was anaemic, however the recession predicted by more hawkish
commentators was thankfully avoided. Economic
theory suggests that changes in monetary policy may well take
effect over `long and variable lags' and so it is too early to
conclude that the risk of a so-called `hard landing' has
passed.
Market
confidence was challenged by the failure of several weaker
financial institutions. Signs that a number of weaker firms were
struggling to adjust to the impact of higher rates became apparent
both in the US and in Europe,
where a clumsily-handled rescue by Swiss authorities of Credit
Suisse unsettled confidence in Additional Tier 1
(AT1)
bank
capital. Thankfully calm returned to the sector as European
financial authorities distanced themselves from the approach taken
by the Swiss.
The
Company's Net Asset Value (NAV) total return rose by 2.1% during
the first six months of the year. Our NAV performance fell short of
that of our reference index, the ICE BofA European Currency High
Yield Index (sterling hedged) total return, which rose by 5.0%.
This was in part the result of the weaker performance of AT1
securities during the period under review. Our share price total
return rose by 1.0% reflecting the fact that we while traded at a
premium to NAV, our premium narrowed slightly from
2.3%
to 1.3%
during the six months.
It was pleasing to see demand for shares remaining robust,
particularly against a backdrop in which investment trust discounts
were wide by historical standards. We were able to issue a total of
4.4 million
shares to meet demand.
Our AGM in
June saw Kate Bolsover, our Senior
Independent Director, retire from the Board. As Chairman of Invesco
Enhanced Income Limited (IPE) Kate played a key role in the
successful merger of IPE and City Merchants High Yield Trust in
2021.
I would
like to thank Kate on behalf of shareholders and the Board for her
fantastic contribution to the Company.
The
Manager's Report, which follows my comments, provides shareholders
with information on the portfolio and the outlook for the high
yield market. There seems little doubt that inflation will continue
to preoccupy markets during the second half of the year and that
the risk of a `hard landing' cannot be dismissed. Nevertheless I
believe it is important to keep in mind that the high yields are
elevated by historical standards and therefore provide a degree of
compensation for the uncertainty surrounding the macroeconomic
outlook. Lastly, at the half way point of our financial year, I am
pleased to confirm that we remain firmly on course to achieve our
full year dividend target of 11.5
pence per share, having declared first and second interim
dividends of 2.875 pence per share in
respect of the current financial year.
Tim Scholefield
Chairman
22 August 2023
Portfolio
Managers' Report
Portfolio
Manager
Rhys Davies, CFA, Fund Manager
Rhys is a
fund manager and senior credit analyst for the Henley-based Fixed
Interest team.
He began
his investment career with Invesco in 2002, moving to the Henley
Fixed Interest team in 2003. He became a fund manager in 2014. He
manages high yield credit portfolios.
He holds a
BSc (Honours) in Management Science from the University of
Manchester Management School. He is a CFA charterholder.
Deputy
Portfolio Manager
Edward Craven, FCA, Fund Manager
Edward is a
fund manager and senior credit analyst for the Henley-based Fixed
Interest team.
He began
his career with KPMG in 2003. In 2008 he moved to The Royal Bank of
Scotland, where he worked in
structured finance. He joined the team at Invesco in 2011 as a
credit analyst and became a fund
manager in 2020, managing multi-asset and high yield
funds.
He holds a
Master's degree in Physics from the University of Bath. He is an
FCA qualified chartered accountant.
Q What
happened to bond markets in the period?
A Bond
markets faced the headwinds of elevated interest rates and
recession fears. Given their greater sensitivity to changes in
monetary policy, government bonds came under the most pressure,
especially UK gilts, as central banks took action to tackle sticky
inflation. Higher quality corporate bonds also struggled to gain
ground. High yield bonds displayed greater resilience,
outperforming cohorts higher up the ratings scale. The ICE BofA
European Currency High Yield Index (sterling hedged) total return
was 5.0% over the six-month period. B rated bonds were the
strongest part of the high yield market, returning 6.2% versus a
4.8% gain for BB rated debt. Weaker/riskier CCC and lower rated
bonds generated a return of 1.2%. By comparison, sterling
investment grade finished the period in negative territory, down
1.0%, with UK gilts faring even worse with a 3.9%
decline.
The yield
on the ICE BofA European Currency High Yield Index edged down from
8.00% to 7.87%. The yield declined because the impact of rising
rates was more than offset by a tightening in spreads. The credit
spread fell from 515bps to 458bps. While this may give the
impression of benign credit conditions, there were bouts of
volatility within the period, particularly around March when the
spread spiked from 415bps to 562bps as concerns over the banking
system in the US spread to Europe.
This period of volatility peaked in the days after the acquisition
of Credit Suisse by UBS.
While
uncertainties about the state of US regional banks following the
closure of First Republic Bank resurfaced in May, credit spreads
continued to tighten. More widely, bond market valuations were
weakened by further expected rises in interest rates as the
projected end of the hiking phase of the cycle was pushed out in
reaction to worse than expected inflation data. Rate expectations
rose more in the UK, where inflation remained stubbornly
high.
Q How
did the Company perform?
A Over
the six months to 30 June 2023 the
share price fell from 166p to 162p, but with dividends reinvested,
the Company delivered a positive share price total return of 1.0%.
The net asset value per share total
return (with dividends reinvested) was 2.1%.
Q What
were the key contributors and detractors of
performance?
A The
portfolio's exposure to credit risk was the main driver of the
positive return. Within this, high yield bonds were the largest
contributor. Investment grade, corporate hybrids and senior bank
debt also contributed. Exposure to subordinated financial debt was
a small negative. The portfolio's duration (sensitivity to interest
rates) was a negative factor as interest rate expectations rose. A
rise in the value of sterling meant that the modest non-sterling
exposure in the portfolio was also negative.
The
unexpected write-down of Credit Suisse Additional Tier 1 (AT1)
bonds when the bank was acquired by UBS was a negative factor. The
portfolio holding in Credit Suisse as of the end of February was
0.54%. However, the portfolio's other holdings in AT1 and its
holdings in Credit Suisse senior debt recovered strongly after this
event. While two Credit Suisse AT1s were in the bottom 10
performing bonds in the portfolio, some other financials such as
Banco Comercial Portugues and Piraeus Financial were among the
portfolio's top five contributors.
Q What
changes were made to the portfolio?
A The
Company was active in the period with a mixture of primary and
secondary market purchases. The focus of purchases was on higher
quality BB rated
bonds that we feel offer a relatively attractive balance of return
to risk.
We
participated in a new issue from generics drug manufacturer Teva
Pharmaceutical Finance, a company that we have invested in for
several years. Other new issues purchased included lottery operator
Allwyn Entertainment and car battery manufacturer Clarios. Although
these are two very different businesses, we believe that both are
well placed to weather any economic downturn. We also bought new
hybrid corporate bonds from Swedish state-owned utility Vattenfall,
Portuguese utility company EDP, Vodafone Group and BT.
In the
secondary market we added to existing positions in UK holiday park
operator Center Parcs and retailer Ocado. Center Parcs is expected
to perform well again in 2023. Ocado's bonds earn an attractive
yield but also have, in our view, good potential capital upside
from any good news around the company's technology licensing.
During the period of weakness in bank bonds following the
write-down of Credit Suisse's AT1s, we added to the position in
Nationwide AT1.
Several
bonds of companies with weaker balance sheets were sold. These
included telecom and retail names. Credit concerns led us to sell
French furniture retailer Mobilux Finance and European residential
landlord Heimstaden. Heimstaden is an example of a credit where the
investment case has changed dramatically due to a rising rate
environment. The European real estate sector is an area about which
we remain cautious. We fear that some business models built on low
borrowing costs are no longer commercially viable.
Following
these transactions, the allocation to corporate high yield was
reduced from 48.4% to 43.7%. Exposure to subordinated bank and
insurance was gradually increased from 30.7% to 33.7%.
We view
financials as providing a more favourable risk-reward profile than
similar-rated high yield bonds with the Company holding a
well-diversified portfolio of more than 20 European banks. We
continue to assess and adjust exposures to the banking sector and
while we believe fundamentals are strong for the banks held in the
trust, we are aware of the risks that a crisis of confidence can
pose to the sector and to individual banks.
In other
activity, long-dated UK gilts were added and now account for 1.6%
of the portfolio.
Net gearing
was increased from 15.7% to 16.9%. Gearing is one of the tools we
can use to adjust the level of risk in the portfolio to align it
with the level of opportunity we see in the market. Although the
cost of borrowing has gone up, we believe gearing is still an
attractive option given the higher level of yield we can now
receive from the bonds we want to buy.
Q What
were conditions like in the primary market?
A European
high yield corporate supply totalled €33 billion in the period,
according to data from JPMorgan. This is a higher level than in the
whole of 2022 but not unusual compared to earlier years. Net supply
was light at around €2 billion, with the bulk of the issuance used
for refinancing purposes. BB rated bonds accounted for the majority
of the deal flow with a 55% market share. Single B bonds accounted
for 36%. Sterling-denominated issuance was boosted by Vodafone
Group and BT hybrids in the second quarter of 2023.
This low
level of bond supply was a technical support for the market and
helps to explain the relatively strong performance of high yield
bonds despite a weakening growth environment.
Q What
is your outlook from here?
A Uncertainty
around the outlook for the economy and inflation, combined with the
ongoing impact of the interest rate hiking phase of the cycle has
fuelled volatility in financial markets, leading to market strain,
as seen most clearly in the banking sector.
We will continue to monitor our allocations within the banking
sector. For now, we are comfortable that the levels of yield
provide an attractive reward for the credit risks, especially with
a well-diversified spread of risk across many banks. It is
certainly encouraging that attractive yields are available from so
many more sources today, but we also expect volatility to be a
defining feature of 2023. It is therefore important to remain
nimble and be prepared to sell bonds that have performed well,
especially whilst our outlook for the global economy and high yield
bond markets, particularly the weaker parts, remains
cautious.
Rhys Davies Edward
Craven
Portfolio
Managers
22 August 2023
Principal
and Emerging Risks and Uncertainties
The Board
has carried out a robust assessment of the risks facing the
Company, including those that would threaten its business model,
future performance, solvency and liquidity. As part of this
process, the Board conducted a full review of the Company's risk
control summary and considered new and emerging risks. These are
not necessarily principal risks for the Company at present but may
have the potential to be in the future. In carrying out this
assessment, the Board considered the emerging risks facing the
Company including geopolitical risks such as the invasion of
Ukraine by Russia, evolving cyber threats and ESG,
including climate risk. The principal risks that follow are those
identified by the Board as the most significant after consideration
of mitigating factors and are not intended to cover all the risk
categories as shown in the Internal Control and Risk Management
section on page 13 of the 2022 annual financial report.
Category
and Principal Risk Description
|
Mitigating
Procedures and Controls
|
Strategic
Risks
|
Market
and Political Risk
The Company
invests primarily in fixed interest securities, the majority of
which are traded on global security markets. The principal risk for
investors in the Company is a significant fall and/or a prolonged
period of decline in these markets. This could be triggered by
unfavourable developments globally and/or in one or more regions,
such as the current conflict in Ukraine, the ongoing effects of the
Covid-19 pandemic and other geopolitical tensions and uncertainties
and their impact on the global economy. The Board cannot control
the effect of such external influences on the portfolio. Market
risk also arises from movements in foreign currency exchange rates
and interest rates.
|
An
explanation of market risk and how this is addressed is given in
note 19.1 to the financial statements within the 2022 annual
financial report. The Portfolio Managers' Report summarises
particular macro economic factors affecting performance during the
period and the portfolio managers' views on those most relevant to
the outlook for the portfolio.
|
Regulatory
or Fiscal Changes
The Company
is incorporated in Jersey which is a low tax jurisdiction subject
to global scrutiny. Any adverse global regulatory or fiscal
measures taken against such low tax jurisdictions, could negatively
impact the Company.
|
The Board
receives regular reports from the Manager and Company Secretary
which highlight any proposed changes to the regulatory/fiscal
regimes which might impact the Company.
|
Wide
Discount leading to Shareholder Dissatisfaction
The
Company's shares are subject to market movements and can trade at a
premium or discount to NAV. Should the Company's shares trade at a
significant discount compared to its peers, then shareholder
dissatisfaction may result if shareholders cannot realise the value
of their investment close to NAV, with the ultimate risk that
arbitragers join the share register.
|
The Board
receives regular reports from both the Manager and the Company's
broker on the Company's share price performance and level of
discount (or premium), together with regular reports on marketing
and meetings with shareholders and prospective investors. The Board
recognises the importance of the Company's scale in terms of the
aggregate value of its shares in the market (`market cap') in
creating liquidity and the benefit of a wide shareholder base, and
has the ability to both issue and buy back shares to assist with
market volatility. The foundation to this lies in solid investment
performance and an attractive
level of dividend.
|
Third
Party Service Providers Risks
|
Lack
of Control over, or Unsatisfactory Performance of Third Party
Service Providers (`TPPs')
Failure by
any service provider to carry out its obligations to the Company in
accordance with the terms of its appointment could have a
materially detrimental impact on the operations of the Company and
affect its ability to pursue successfully its investment policy and
expose it to reputational risk. Disruption to the accounting,
payment systems or custody records could prevent the accurate
reporting and monitoring of the Company's financial
position.
|
Details of
how the Board monitors the services provided by the Manager and the
other TPPs, and the key elements designed to provide effective
internal control, are included in the internal control and risk
management section on page 13 of the 2022 annual financial
report.
|
Cyber
Risk
The
Company's operational structure means that cyber risk (information
technology and physical security) predominantly
arises at
its TPPs. This cyber risk includes fraud, sabotage or crime
perpetrated against the Company or any of its TPPs.
|
The Audit
& Risk Committee on behalf of the Board periodically reviews
TPPs' service organisation control reports and meets with
representatives of the Manager's Investment Management, Compliance,
Internal Audit and Investment Trust teams as well as the Company
Secretary's senior staff and Compliance team. The Board receives
periodic updates on the Manager's and the Company Secretary's
information security arrangements. The Board monitors TPPs'
business continuity plans and testing - including their regular
`live' testing of workplace recovery arrangements.
|
Business
Continuity Risk
Impact of a
major event, such as Covid-19, on the operations of the service
providers, including any prolonged disruption.
|
The
Manager's business continuity plans are reviewed on a regular basis
and the Directors are satisfied that the Manager has in place
robust plans and infrastructure to minimise the impact on its
operations so that the Company can continue to trade, meet
regulatory obligations, report and meet shareholder
requirements.
The Board
receives periodic reports from the Manager and TPPs on business
continuity processes and has been provided with assurance from them
all insofar as possible that measures are in place for them to
continue to provide contracted services to the Company.
|
In the view
of the Board, these principal and emerging risks and uncertainties
are as applicable to the remaining six months of the financial year
as they were to the period under review.
Thirty
Largest Investment Issuers
AT
30 JUNE 2023
|
|
|
Market
|
|
|
|
Country
of
|
Value
|
%
of
|
Issuer
|
Industry
|
Incorporation
|
£'000
|
Portfolio
|
Lloyds
Banking Group
|
Financials
|
UK
|
10,362
|
3.2
|
Barclays
|
Financials
|
UK
|
10,326
|
3.2
|
Co-Operative
Bank
|
Financials
|
UK
|
6,920
|
2.1
|
BNP
Paribas
|
Financials
|
France
|
6,155
|
1.9
|
Aviva
|
Financials
|
UK
|
5,947
|
1.8
|
Teva
Pharmaceutical Finance
|
Health
Care
|
Netherlands
|
5,685
|
1.7
|
Codere New
Topco
|
Consumer
Services
|
Luxembourg
|
5,456
|
1.7
|
UK Treasury
Bill
|
Government
Bonds
|
UK
|
5,216
|
1.6
|
Albion
Finance
|
Consumer
Services
|
Luxembourg
|
5,153
|
1.6
|
Ziggo Bond
Finance
|
Telecommunications
|
Netherlands
|
5,137
|
1.6
|
Vodafone
Group
|
Telecommunications
|
UK
|
5,058
|
1.5
|
Virgin
Media O2
|
Telecommunications
|
UK
|
4,893
|
1.5
|
Eléctricité
De France
|
Utilities
|
France
|
4,707
|
1.4
|
Petra
Diamonds
|
Basic
Materials
|
Bermuda
|
4,603
|
1.4
|
Banco
BPM
|
Financials
|
Italy
|
4,484
|
1.4
|
Nationwide
|
Financials
|
UK
|
4,239
|
1.3
|
Virgin
Money
|
Financials
|
UK
|
4,127
|
1.3
|
Rothschilds
Continuation Finance
|
Financials
|
Guernsey
|
4,019
|
1.2
|
Clarios
|
Basic
Materials
|
USA
|
4,007
|
1.2
|
Deutsche
Bank
|
Financials
|
Germany
|
4,003
|
1.2
|
Bellis
|
Consumer
Goods
|
UK
|
3,829
|
1.2
|
Sainsbury's
Bank
|
Financials
|
UK
|
3,826
|
1.2
|
Legal &
General
|
Financials
|
UK
|
3,502
|
1.1
|
Frigoglass
Finance
|
Industrials
|
Netherlands
|
3,494
|
1.1
|
Parts
Europe
|
Consumer
Goods
|
France
|
3,479
|
1.1
|
Ford Motor
Credit
|
Consumer
Goods
|
USA
|
3,436
|
1.1
|
BCP V
Modular Services
|
Consumer
Services
|
UK
|
3,361
|
1.0
|
ING
|
Financials
|
Netherlands
|
3,238
|
1.0
|
Ocado
|
Consumer
Goods
|
UK
|
3,157
|
1.0
|
RL
Finance
|
Financials
|
UK
|
3,122
|
1.0
|
Top
30 investments
|
|
|
144,941
|
44.6
|
Other
investments
|
|
|
180,403
|
55.4
|
Total
investments
|
|
|
325,344
|
100.0
|
Governance
Invesco
Bond Income Plus Limited is a Jersey domiciled investment company
and is regulated by the Jersey Financial Services
Commission.
Related
Parties
Note 23 to
the financial statements within the Company's 2022 annual financial
report gives details of related party transactions. The basis of
these has not changed for the six months being reported. The 2022
annual financial report is available on the Company's section of
the Manager's website at: www.invesco.co.uk/bips.
Going
Concern
The
financial statements have been prepared on a going concern basis.
When considering this, the Directors took into account the annual
shareholders' continuation vote and the following: the Company's
investment objective and risk management policies, the nature of
the portfolio and expenditure and cash flow projections. As a
result, they determined that the Company has adequate resources, an
appropriate financial structure, readily realisable fixed assets to
repay current liabilities and suitable management arrangements in
place to continue in operational existence for the foreseeable
future.
Bond
Rating Analysis
The table
below reflects Standard and Poor's (`S&P') ratings. Where an
S&P rating is not available, an equivalent average rating has
been used. Investment grade is BBB- and above.
For the
definitions of these ratings see the Glossary of Terms and
Alternative Performance Measures on page 81 of the Company's 2022
annual financial report.
|
30
June 2023
|
|
31
December 2022
|
|
|
|
Cumulative
|
|
Cumulative
|
Rating
|
Portfolio
%
|
Total
%
|
Portfolio
%
|
Total
%
|
Investment
Grade:
|
|
|
|
|
AA
|
1.6
|
1.6
|
-
|
-
|
A+
|
0.6
|
2.2
|
0.2
|
0.2
|
A-
|
1.2
|
3.4
|
0.8
|
1.0
|
BBB+
|
1.9
|
5.3
|
2.0
|
3.0
|
BBB
|
12.0
|
17.3
|
10.1
|
13.1
|
BBB-
|
4.2
|
21.5
|
4.5
|
17.6
|
Non-investment
Grade:
|
|
|
|
|
BB+
|
8.9
|
30.4
|
6.2
|
23.8
|
BB
|
10.4
|
40.8
|
9.8
|
33.6
|
BB-
|
17.9
|
58.7
|
14.5
|
48.1
|
B+
|
8.7
|
67.4
|
10.7
|
58.8
|
B
|
13.4
|
80.8
|
21.0
|
79.8
|
B-
|
7.8
|
88.6
|
5.6
|
85.4
|
CCC+
|
2.5
|
91.1
|
5.5
|
90.9
|
CCC
|
1.4
|
92.5
|
2.8
|
93.7
|
CCC-
|
0.7
|
93.2
|
0.6
|
94.3
|
CC
|
1.6
|
94.8
|
0.6
|
94.9
|
NR*
(including equity)
|
5.2
|
100.0
|
5.1
|
100.0
|
|
100.0
|
|
100.0
|
|
Summary
of Analysis
|
|
|
|
|
Investment
Grade
|
21.5
|
|
17.6
|
|
Non-investment
Grade
|
73.3
|
|
77.3
|
|
NR
(including equity)
|
5.2
|
|
5.1
|
|
|
100.0
|
|
100.0
|
|
* NR: not
rated.
Directors'
Responsibility Statement
in respect
of the preparation of the Half-Yearly Financial Report
The
Directors are responsible for preparing the financial report, using
accounting policies consistent with applicable law and
International Financial Reporting Standards.
The
Directors confirm that to the best of their knowledge:
- the
condensed set of financial statements contained within the
Half-Yearly Financial Report have been prepared in accordance with
International Accounting Standards 34 `Interim Financial
Reporting';
- the
interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the FCA's Disclosure
Guidance and Transparency Rules; and
- the
interim management report includes a fair review of the information
required on related party transactions.
The
Half-Yearly Financial Report has not been audited or reviewed by
the Company's auditor.
Signed on
behalf of the Board of Directors.
Heather MacCallum
Audit &
Risk Committee Chair
22 August 2023
Condensed
Statement of Comprehensive Income
FOR
THE SIX MONTHS ENDED
|
30
June 2023
|
30
June 2022
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Loss on
investments held at fair value
|
-
|
(9,688)
|
(9,688)
|
-
|
(35,983)
|
(35,983)
|
Profit/(loss)
on derivative instruments
|
|
|
|
|
|
|
-
currency hedges and CDS
|
-
|
4,130
|
4,130
|
-
|
(10,990)
|
(10,990)
|
Exchange
differences
|
-
|
1,575
|
1,575
|
-
|
(817)
|
(817)
|
Income -
note 2
|
12,113
|
-
|
12,113
|
10,962
|
-
|
10,962
|
Investment
management fees - note 3
|
(461)
|
(461)
|
(922)
|
(480)
|
(480)
|
(960)
|
Other
expenses
|
(386)
|
(2)
|
(388)
|
(417)
|
(2)
|
(419)
|
Profit/(loss)
before finance costs and taxation
|
11,266
|
(4,446)
|
6,820
|
10,065
|
(48,272)
|
(38,207)
|
Finance
costs - note 3
|
(420)
|
(420)
|
(840)
|
29
|
29
|
58
|
Profit/(loss)
before taxation
|
10,846
|
(4,866)
|
5,980
|
10,094
|
(48,243)
|
(38,149)
|
Taxation -
note 4
|
-
|
-
|
-
|
(29)
|
-
|
(29)
|
Profit/(loss)
after taxation
|
10,846
|
(4,866)
|
5,980
|
10,065
|
(48,243)
|
(38,178)
|
Return per
ordinary share
|
6.16p
|
(2.77)p
|
3.39p
|
5.97p
|
(28.62)p
|
(22.65)p
|
Weighted
average number of ordinary shares
|
|
|
|
|
|
|
in
issue during the period
|
|
|
176,159,363
|
|
|
168,577,596
|
The total
columns of this statement represent the Company's statement of
comprehensive income, prepared in accordance with International
Financial Reporting Standards as adopted by the European Union. The
profit/(loss) after taxation is the total comprehensive
income/(loss). The supplementary revenue and capital columns are
both prepared in accordance with the Statement of Recommended
Practice issued by the Association of Investment Companies. All
items in the above statement derive from continuing operations of
the Company. No operations were acquired or discontinued in the
period.
Condensed
Statement of Changes in Equity
|
Stated
|
Capital
|
Revenue
|
|
|
Capital
|
Reserve
|
Reserve
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
For the six
months ended 30 June 2023
|
|
|
|
|
At 31
December 2022
|
305,062
|
(32,141)
|
8,168
|
281,089
|
(Loss)/profit
after taxation
|
-
|
(4,866)
|
10,846
|
5,980
|
Dividends
paid - note 5
|
(279)
|
-
|
(9,817)
|
(10,096)
|
Net
proceeds from issue of new shares - note 6
|
7,172
|
-
|
-
|
7,172
|
At 30 June
2023
|
311,955
|
(37,007)
|
9,197
|
284,145
|
For the six
months ended 30 June 2022
|
|
|
|
|
At 31
December 2021
|
297,326
|
23,531
|
5,873
|
326,730
|
(Loss)/profit
after taxation
|
-
|
(48,243)
|
10,065
|
(38,178)
|
Dividends
paid - note 5
|
-
|
-
|
(9,272)
|
(9,272)
|
At 30 June
2022
|
297,326
|
(24,712)
|
6,666
|
279,280
|
Condensed
Balance Sheet
|
At
|
At
|
|
30
June
|
31
December
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Non-current
assets
|
|
|
Investments
held at fair value through profit or loss
|
325,344
|
317,870
|
Current
assets
|
|
|
Derivative
financial instruments - receivable
|
121,478
|
106,588
|
Margin
held at brokers
|
1,696
|
582
|
Proceeds
due from issue of new shares
|
-
|
206
|
Income
tax recoverable
|
3
|
3
|
Prepayments
and accrued income
|
5,795
|
6,403
|
Cash
and cash equivalents
|
8,546
|
9,082
|
|
137,518
|
122,864
|
Current
liabilities
|
|
|
Amounts
payable relating to issue of new shares
|
-
|
(1)
|
Accruals
|
(846)
|
(745)
|
Derivative
financial instruments - payable
|
(119,710)
|
(105,148)
|
Securities
sold under agreements to repurchase
|
(58,161)
|
(53,751)
|
|
(178,717)
|
(159,645)
|
Net current
liabilities
|
(41,199)
|
(36,781)
|
Net
assets
|
284,145
|
281,089
|
Capital and
reserves
|
|
|
Stated
capital
|
311,955
|
305,062
|
Capital
reserve
|
(37,007)
|
(32,141)
|
Revenue
reserve
|
9,197
|
8,168
|
Total
shareholders' funds
|
284,145
|
281,089
|
Net asset
value per ordinary share
|
159.90p
|
162.20p
|
Number of
shares in issue at the period end - note 6
|
177,702,596
|
173,302,596
|
Condensed
Statement of Cash Flows
|
Six
months to
|
Six
months to
|
|
30
June
|
30
June
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Cash flow
from operating activities
|
|
|
Profit/(loss)
before finance costs and taxation
|
6,820
|
(38,207)
|
Tax on
overseas income
|
-
|
(29)
|
Adjustment
for:
|
|
|
Purchases
of investments
|
(83,043)
|
(61,544)
|
Sales
of investments
|
65,881
|
50,557
|
|
(17,162)
|
(10,987)
|
Increase
from securities sold under agreements to repurchase
|
4,410
|
15,012
|
Loss on
investments held at fair value
|
9,688
|
35,983
|
Net
movement from derivative instruments - currency hedges
|
(328)
|
5,194
|
Increase in
receivables
|
(506)
|
(2,823)
|
Decrease in
payables
|
(3)
|
(105)
|
Net cash
inflow from operating activities
|
2,919
|
4,038
|
Cash flow
from financing activities
|
|
|
Finance
cost (paid)/received(1)
|
(736)
|
64
|
Net
proceeds from issue of new shares
|
7,377
|
-
|
Dividends
paid - note 5
|
(10,096)
|
(9,272)
|
Net cash
outflow from financing activities
|
(3,455)
|
(9,208)
|
Net
decrease in cash and cash equivalents
|
(536)
|
(5,170)
|
Cash and
cash equivalents at the start of the period
|
9,082
|
8,168
|
Cash and
cash equivalents at the end of the period
|
8,546
|
2,998
|
Reconciliation
of cash and cash equivalents to the Balance Sheet is as
follows:
|
|
|
Cash held
at custodian
|
4,826
|
2,448
|
Invesco
Liquidity Funds plc - Sterling
|
3,720
|
550
|
Cash and
cash equivalents
|
8,546
|
2,998
|
Cash flow
from operating activities includes:
|
|
|
Dividends
received
|
191
|
115
|
Interest
received
|
12,535
|
10,738
|
(1) Finance
costs received in the six months ended 30
June 2022 relate to the negative interest rates on the Euro
denominated financing of securities sold under agreements to
repurchase (repo financing).
|
At
|
|
At
|
|
1
January
|
Cash
|
30
June
|
|
2023
|
flows
|
2023
|
Reconciliation
of net debt
|
£'000
|
£'000
|
£'000
|
Cash and
cash equivalents
|
9,082
|
(536)
|
8,546
|
Securities
sold under agreements to repurchase
|
(53,751)
|
(4,410)
|
(58,161)
|
Total
|
(44,669)
|
(4,946)
|
(49,615)
|
Notes
to the Condensed Financial Statements
1. Basis
of Preparation
The
condensed financial statements have been prepared using the same
accounting policies as those adopted in the Company's 2022 annual
financial report. They have been prepared on an historical cost
basis, in accordance with the applicable International Financial
Reporting Standards (IFRS), as adopted by the European Union and,
where possible, in accordance with the Statement of Recommended
Practice for Financial Statements of Investment Trust Companies and
Venture Capital Trusts, updated by the Association of Investment
Companies in July 2022 (AIC
SORP).
2. Income
|
Six
months to
|
Six
months to
|
|
30
June
|
30
June
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Income from
investments:
|
|
|
UK
dividends
|
95
|
112
|
UK
investment income - interest
|
4,280
|
3,894
|
Overseas
dividends
|
53
|
4
|
Overseas
investment income - interest
|
7,609
|
6,950
|
|
12,037
|
10,960
|
Other
income:
|
|
|
Deposit
interest
|
50
|
2
|
Other
income
|
26
|
-
|
|
76
|
2
|
Total
income
|
12,113
|
10,962
|
3. Management
Fee and Finance costs
Investment
management fees and finance costs are allocated 50% to capital and
50% to revenue (2022: 50% to capital and 50% to
revenue).
Finance
costs relate to interest payable on borrowings from securities sold
under agreements to repurchase (repo) or bank overdrafts. In some
instances, interest on repo is negative i.e. receivable and has
been netted against interest payable, shown within finance costs,
as they relate to borrowings utilised by the Company.
4. Taxation
The Company
is subject to Jersey income tax at the rate of 0% (2022: 0%). The
prior period overseas tax charge consists of irrecoverable
withholding tax.
5. Dividends
paid on Ordinary Shares
|
Six
months to
|
Six
months to
|
|
30
June 2023
|
30
June 2022
|
|
pence
|
£'000
|
pence
|
£'000
|
Interim
dividends in respect of previous period
|
2.875
|
5,008
|
2.750
|
4,636
|
First
interim dividend
|
2.875
|
5,088
|
2.750
|
4,636
|
|
5.750
|
10,096
|
5.500
|
9,272
|
Dividends
paid in the period have been charged to revenue except for £279,000
which was charged to stated capital (six months to
30 June
2022: £nil). This amount is equivalent to the income accrued
on the new shares issued in the period (see note 6).
A second
interim dividend of 2.875p (2022: 2.750p) has been declared and was
paid on 18 August 2023 to ordinary
shareholders on the register on 14 July
2023.
6. Stated
Capital, including Movements
Allotted
ordinary shares of no par value.
|
|
|
|
Six
months to
|
Year
to
|
|
30
June
|
31
December
|
|
2023
|
2022
|
Stated
capital:
|
|
|
Brought
forward
|
£305,062,000
|
£297,326,000
|
Net
proceeds from shares issued
|
£7,172,000
|
£7,736,000
|
Dividends
paid from stated capital
|
£(279,000)
|
-
|
Carried
forward
|
£311,955,000
|
£305,062,000
|
Number of
ordinary shares:
|
|
|
Brought
forward
|
173,302,596
|
168,577,596
|
Issued
in the period
|
4,400,000
|
4,725,000
|
Carried
forward
|
177,702,596
|
173,302,596
|
Per
share:
|
|
|
- average
issue price
|
165.95p
|
164.54p
|
7. Classification
Under Fair Value Hierarchy
Note 20 of
the 2022 annual financial report sets out the basis of
classification.
There were
no Level 3 holdings at 30 June 2023
(31 December 2022: one) and the total
(not shown) is therefore the aggregate of Level 1,
Level 2 and Level 3.
|
At
30 June 2023
|
At
31 December 2022
|
|
Level
1
|
Level
2
|
Level
3
|
Level
1
|
Level
2
|
Level
3
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Financial
assets designated at fair value through profit
|
|
|
|
|
|
|
or
loss:
|
|
|
|
|
|
|
-
Fixed interest securities(1)
|
-
|
280,213
|
-
|
-
|
294,154
|
1,165
|
-
Convertibles
|
-
|
36,481
|
-
|
-
|
18,614
|
-
|
-
Government
|
-
|
5,451
|
-
|
-
|
216
|
-
|
-
Preference
|
2,441
|
-
|
-
|
2,641
|
-
|
-
|
-
Equities
|
758
|
-
|
-
|
1,080
|
-
|
-
|
Derivative
financial instruments:
|
|
|
|
|
|
|
-
Forward currency contract
|
-
|
1,768
|
-
|
-
|
1,440
|
-
|
Total for
financial assets
|
3,199
|
323,913
|
-
|
3,721
|
314,424
|
1,165
|
(1) Fixed
interest securities include both fixed and floating rate
securities.
8. Status
of Half-Yearly Financial Report
The
financial information contained in this Half-Yearly Financial
Report, which has not been audited by the Company's auditor, does
not constitute statutory accounts as defined in Article 104 of
Companies (Jersey) Law 1991. The financial information for the half
year ended 30 June 2023 and the half
year ended 30 June 2022 has not been
audited. The figures and financial information for the year ended
31 December
2022 are extracted and abridged from the latest audited
accounts and do not constitute the statutory accounts for that
year.
By order of
the Board
JTC
Fund Solutions (Jersey) Limited
Company
Secretary
22 August 2023
Glossary
of Terms and Alternative Performance Measures
Alternative
Performance Measure (`APM')
An APM is a
measure of performance or financial position that is not defined in
applicable accounting standards and cannot be directly derived from
the financial statements. The calculations shown in the
corresponding tables are for the six months ended 30 June 2023 and the year ended 31 December 2022. The APMs listed here are widely
used in reporting within the investment company sector and
consequently aid comparability, providing useful additional
information.
Premium/(discount)
(`APM')
Premium is
a measure of the amount by which the mid-market price of an
investment company share is higher than the underlying net
asset
value of
that share. Discount is a measure of the amount by which the
mid-market price of an investment company share is lower than the
underlying net asset value (`NAV') of that share. If the shares are
trading at a premium the result of the below calculation will be
positive and if they are trading at a discount it will be negative.
In this Half-Yearly Financial Report the premium/(discount) is
expressed as a percentage of the net asset value per share and is
calculated according to the formula set out below.
|
|
|
30
June
|
31
December
|
|
|
|
2023
|
2022
|
Share
price
|
|
a
|
162.00p
|
166.00p
|
Net asset
value per share
|
|
b
|
159.90p
|
162.20p
|
Premium
|
|
c =
(a-b)/b
|
1.3%
|
2.3%
|
Modified
Duration
Modified
Duration is regarded as a measure of the volatility of a portfolio,
as, with all other risk factors being equal, bonds with higher
durations have greater price volatility than bonds with lower
durations. Modified duration measures the change in the value of a
bond (or portfolio) in response to a change in 100 basis-point (1%)
change in interest rates. For example, in general this would mean
that a 1% rise in interest rates leads to a 1% fall in the value of
the bond or portfolio.
Gearing
The gearing
percentage reflects the amount of borrowings that a company has
invested. This figure indicates the extra amount by which net
assets, or shareholders' funds, would move if the value of a
company's investments were to rise or fall. A positive percentage
indicates the extent to which net assets are geared; a nil gearing
percentage, or `nil', shows a company is ungeared. A negative
percentage indicates that a company is not fully invested and is
holding net cash as described below.
There are
several methods of calculating gearing and the following has been
used in this report:
Gross
Gearing (`APM')
This
reflects the amount of gross borrowings in use by a company and
takes no account of any cash balances. It is based on gross
borrowings as a percentage of net assets.
|
|
30
June
|
31
December
|
|
|
|
2023
|
2022
|
|
|
|
£'000
|
£'000
|
Securities
sold under agreements to repurchase (repo financing)
|
|
|
58,161
|
53,751
|
Gross
borrowings
|
|
a
|
58,161
|
53,751
|
Net asset
value
|
|
b
|
284,145
|
281,089
|
Gross
gearing
|
|
c =
a/b
|
20.5%
|
19.1%
|
Net
Gearing or Net Cash (`APM')
Net gearing
reflects the amount of net borrowings invested, i.e. borrowings
less cash and cash equivalents (incl. investments in money market
funds). It is based on net borrowings as a percentage of net
assets. Net cash reflects the net exposure to cash and cash
equivalents, as a percentage of net assets, after any offset
against total borrowings.
|
|
30
June
|
31
December
|
|
|
|
2023
|
2022
|
|
|
|
£'000
|
£'000
|
Securities
sold under agreement to repurchase (repo financing)
|
|
|
58,161
|
53,751
|
Less: cash
and cash equivalents including margin
|
|
|
(10,242)
|
(9,664)
|
Net
borrowings
|
|
a
|
47,919
|
44,087
|
Net asset
value
|
|
b
|
284,145
|
281,089
|
Net
gearing
|
|
c =
a/b
|
16.9%
|
15.7%
|
Net
Asset Value (`NAV')
Also
described as shareholders' funds, the NAV is the value of total
assets less liabilities. Liabilities for this purpose include
current and long-term liabilities. The NAV per ordinary share is
calculated by dividing the net assets by the number of ordinary
shares in issue. For accounting purposes assets are valued at fair
(usually market) value and liabilities are valued at par (their
repayment - often nominal - value).
Return
The return
generated in a period from the investments including the increase
and decrease in the value of investments over time and the income
received.
Total
Return
Total
return is the theoretical return to shareholders that measures the
combined effect of any dividends paid together with the rise or
fall in the share price or NAV. In this Half-Yearly Financial
Report these return figures have been sourced from Refinitiv who
calculate returns on an industry comparative basis, taking the Net
Asset Values and Share Prices for the opening and closing periods
and adding the impact of dividend reinvestments for the relevant
periods.
Net
Asset Value Total Return (`APM)'
Total
return on net asset value per share, with debt at market value,
assuming dividends paid by the Company were reinvested into the
shares of the Company at the NAV per share at the time the shares
were quoted ex-dividend.
Share
Price Total Return (`APM')
Total
return to shareholders, on a mid-market price basis, assuming all
dividends received were reinvested, without transaction costs, into
the shares of the Company at the time the shares were quoted
ex-dividend.
|
Net
Asset
|
Share
|
|
Six
Months Ended 30 June 2023
|
|
Value
|
Price
|
As at 30
June 2023
|
|
159.90p
|
162.00p
|
As at 31
December 2022
|
|
162.20p
|
166.00p
|
Change in
period
|
a
|
-1.4%
|
-2.4%
|
Impact of
dividend reinvestments(1)
|
b
|
3.5%
|
3.4%
|
Total
return for the period
|
c =
a+b
|
2.1%
|
1.0%
|
|
|
Net
Asset
|
Share
|
Year
Ended 31 December 2022
|
|
Value
|
Price
|
As at 31
December 2022
|
|
162.20p
|
166.00p
|
As at 31
December 2021
|
|
193.82p
|
187.25p
|
Change in
year
|
a
|
-16.3%
|
-11.3%
|
Impact of
dividend reinvestments(1)
|
b
|
5.5%
|
6.1%
|
Total
return for the year
|
c =
a+b
|
-10.8%
|
-5.2%
|
(1) Total
dividends paid during the period of 5.75p (31 December 2022: 11.25p) reinvested at the NAV
or share price on the ex-dividend date. NAV or share price falls
subsequent to the reinvestment date consequently further reduce the
returns, vice versa if the NAV or share price rises.
Directors,
Investment Manager and Administration
Directors
Tim Scholefield (Chairman)
Heather MacCallum (Audit & Risk Committee Chair and
Senior Independent Director)
Christine Johnson
Caroline Dutot
Tom Quigley
Alternative
Investment Fund Manager (Manager)
Invesco
Fund Managers Limited
Perpetual
Park
Perpetual
Park Drive
Henley-on-Thames
Oxfordshire RG9 1HH
( 01491
417 000
www.invesco.co.uk/investmenttrusts
Manager's
Website
Information
relating to the Company can be found on the Manager's website, at
www.invesco.co.uk/bips
The
contents of websites referred to in this document, or accessible
from links within those websites, are not incorporated into, nor do
they form part of, this interim report.
Company
Secretary, Administrator and Registered Office
JTC Fund
Solutions (Jersey) Limited
PO Box
1075
28
Esplanade
St
Helier
Jersey JE4
2QP
Company
Secretarial Contact: Hilary
Jones
01534
700000
invesco@jtcgroup.com
General
Data Protection Regulation
The
Company's privacy notice can be found at:
www.invesco.co.uk/bips
Corporate
Broker
Winterflood
Investment Trusts
The Atrium
Building
Cannon
Bridge
25 Dowgate
Hill
London EC4R 2GA
Independent
Auditor
PricewaterhouseCoopers
CI LLP
37
Esplanade
St
Helier
Jersey JE1
4XA
Depositary,
Custodian & Banker
The Bank of
New York Mellon (International) Limited
160 Queen
Victoria Street
London EC4V 4LA
Invesco
Client Services
Invesco has
a Client Services Team available from 8.30am
to 6.00pm every working day. Please feel free to take
advantage of their expertise by ringing:
0800 085
8677
www.invesco.co.uk/investmenttrusts
Registrar
Computershare
Investor Services (Jersey) Limited
13 Castle
Street
St
Helier
Jersey JE1
1ES
+44 (0370)
707 4040
Shareholders
who hold shares directly and not through a Savings Scheme or ISA
and have queries relating to their shareholding should contact the
Registrar's call centre on the above number.
Calls are
charged at the standard geographic rate and will vary by
provider.
Calls from
outside the United Kingdom will be
charged at the applicable international rate. Lines are open
8.30am to 5.30pm Monday to Friday
(excluding UK public holidays).
Shareholders
holding shares directly can also access their holding details via
Computershare's website:
http://www.investorcentre.co.uk/je
The
Registrar provides an on-line share dealing service to existing
shareholders who are not seeking advice on buying or selling via
Computershare's website
http://www.investorcentre.co.uk/je
For queries
relating to shareholder dealing contact
+44 (0) 370
703 0084
Calls are
charged at the standard geographic rate and will vary by provider.
Calls from outside the United
Kingdom will be charged at the applicable international
rate. Lines are open 8.30am to 5.30pm Monday
to Friday (excluding UK public holidays).
Dividend
Re-Investment Plan
The
Registrar also manages a Dividend Re-Investment Plan for the
Company. Shareholders wishing to re-invest their dividends should
contact the Registrar.
NATIONAL
STORAGE MECHANISM
A copy of
the Half-Yearly Financial
Report will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Hard copies
of the Half-Yearly Financial Report will be posted to shareholders.
Copies may be obtained during normal business hours from the
Company's Registered Office, JTC Fund Solutions (Jersey) Limited,
PO Box 1075, 28 Esplanade, St Helier, Jersey JE4 2QP or the
Manager's website via the directory found at the following
link: www.invesco.co.uk/bips.
Hilary Jones
JTC Fund
Solutions (Jersey) Limited
Company
Secretary
Telephone:
01534 700000
22 August 2023
LEI:
549300JLX6ELWUZXCX14